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The term “tax alpha,” which was coined by Rob Arnott of investment manager Research Affiliates, represents the improvement in net returns gained from effective tax management. (from Seeking Tax Alpha By David E. Adler at AdvisorMax.com)

During my research and discussions with industry professionals, I’ve discovered (not surprisingly) that there are many definitions of tax alpha.

For example, according to an article that is also titled, Seeking Tax Alpha by John Phoenix, CEO of Metamorphosis Money Management (M3):

Tax alpha is the improvement of portfolio returns created by sound tax management: strategically harvesting stock losses for tax deductions by selling depreciated stocks at opportunities as they occur.

This definition seems limiting since tax harvesting is far from the only tax management method available to an investment manager.  Of course, one M3’s main sales tools is their focus on year-round tax harvesting.  So, this emphasis in John’s article is not surprising.